EXHIBIT 10.19


 


LOAN AGREEMENT


 


This
LOAN AGREEMENT between Federated Rural Electric Ass’n, a Minnesota cooperative
corporation (Lender), and Heron Lake BioEnergy, LLC, a Minnesota limited
liability company (Borrower) is made and executed as of the day of December 28,
2007.


 


COVENANTS


 


1.                                       The Borrower covenants that the loan
proceeds shall be used solely to (a) finance equipment for an ethanol
facility as set forth in the Borrower’s application to the Lender or (b) to
reimburse short-term financing and expenditures for the Approved Purpose.  The Borrower further covenants that the
proceeds of this loan shall not be used to finance any costs or retire any
indebtedness incurred for the Approved Purpose prior to Rural
Business-Cooperative Service (RBS) receipt on June 17, 2005 of the
Application Materials.


 


2.                                       The Borrower shall provide record of
binding commitments for supplemental financing in the approximate amount of
$105,793,844 that is necessary, in addition to the Loan proceeds, to ensure
completion of the project.


 


3.                                       The Borrower shall provide a final draft
version of an approving legal opinion, in the form of a typical opinion given
to a lender in the State of Minnesota in commercial loan transactions, opining
as to the legal authority of the Borrower to execute the promissory note and
perform its obligations under this LOAN AGREEMENT.


 


4.                                       The Lender shall provide to RBS a copy of
the executed Loan Agreement, including the lower tier debarment certification,
the Promissory Note, and any Security Agreement, together with the legal
opinion rendered by the Borrower.


 


5.                                       The Borrower shall provide to the Lender
an itemized list, with attached invoices, receipts, bills of sale, and other
evidence that shows the expenditures made on the project for the Approved Purpose
using the proceeds of the Loan from the Lender upon completion of the project,
or by the first anniversary of the date of the advance of the funds to the
Borrower, whichever occurs first.


 


6.                                       This LOAN AGREEMENT executed by an
authorized official of the Borrower certifies that the proceeds of the rural
economic development loan from Federated Rural Electric Ass’n were expended on
the approved purposes shown on the list and the attached invoices, receipts,
bills of sale, and other evidence representing the items shown on the list.


 


7.                                       The Lender shall maintain a copy of this
certified list and attachments at its premises for review by RBS
representatives, auditors, or others conducting a review or audit of the Lender
and the expenditure of the proceeds of the Loan.  The Lender is also required to submit a
duplicate certified listing of the expenditures and attachments to RBS for its
files.


 

















 


8.                                       The Borrower shall also expend the loan
funds, which were provided from the proceeds of the Loan on the Approved
Purposes by the second anniversary of the date of the advance of funds to the
Borrower, or such later date as RBS may approve in writing.  Funds that have not been expended by the
second anniversary date of the advance of funds to the Borrower, or such later
date.  as RBS has approved, must be
returned to the Lender.  The Lender shall
return as a prepayment on the RBS note all unexpended funds that the Borrower
returns to the Lender under the terms of the Lender’s Agreement.


 


9.                                       The Borrower shall provide to the Lender
a Management Representation Letter certifying to the statements required in the
Letter of Agreement from RBS to Federated Rural Electric Ass’n.  (See Exhibit A)


 


IN
WITNESS WHEREOF, Debtor has executed and delivered to Lender this Loan Agreement
as of the date and year first above written.


 


	
   

  	
  Heron Lake
  BioEnergy, LLC

  
	
   

  	
  (Borrower)

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/
  Robert J. Ferguson

  
	
   

  	
  Mr. Robert
  Ferguson

  
	
   

  	
  President

  
	
   

  	
   

  
	
   

  	
  and;

  
	
   

  	
   

  
	
   

  	
  Federated Rural
  Electric Ass’n

  
	
   

  	
  (Lender)

  
	
   

  	
   

  
	
   

  	
  By:

  	
      /s/
  Richard G. Burud

  
	
   

  	
  Richard G. Burud

  
	
   

  	
  General Manager

  



 

















 


HERON LAKE BIO ENERGY


 


SUPPLEMENTAL
FINANCING:


 


	
   

  	
   

  	
  Source of Funds:

  	
   

  	
  Amount:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Member Equity

  	
   

  	
  $

  	
  49,427,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  AgStar Financial Services

  	
   

  	
  $

  	
  64,583,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Grants

  	
   

  	
  $

  	
  350,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Interest

  	
   

  	
  $

  	
  1,300,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TOTAL

  	
   

  	
  $

  	
  115,660,000

  	
   

  



 


I
certify that the funding listed above has been obtained or has been committed
to the project described in the Rural Economic Development Loan and Grant
Program application materials submitted to FEDERATED RURAL ELECTRIC and the
Rural Business-Cooperative Service.


 


	
  /s/ Robert J. Ferguson

  	
   

  	
   

  
	
  Signature of Authorized
  Official

  	
   

  	
  Date

  
	
  of Ultimate Recipient

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  President HLBE

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  



 


[Attach evidence of availability
of financing or binding commitments]


 

















 


U.S. DEPARTMENT OF AGRICULTURE


 


Certification
Regarding Debarment, Suspension, Ineligibility

and Voluntary Exclusion - Lower Tier Covered Transactions


 


This
certification is required by the regulations implementing Executive Order
12549, Debarment and Suspension, 7 CFR Part 3017, Section 3017.510,
Participants’ responsibilities.  The
regulations were published as Part IV of the January 30, 1989,
Federal Register (pages 4722-4733). 
Copies of the regulations may be obtained by contacting the Department
of Agriculture agency with which this transaction originated.


 


(BEFORE COMPLETING CERTIFICATION, READ
INSTRlUCI10NS ON REVERSE)


 


(1)           The prospective lower tier participant
certifies, by submission of this proposal, that neither it nor its principals is
presently debarred, suspended, proposed for debarment, declared ineligible, or
voluntarily excluded from participation in this transaction by any Federal department
or agency.


 


(2)           Where the prospective lower tier
participant is unable to certify to any of the statements in this certification,
such prospective participant shall attach an explanation to this proposal.


 


 


	
  Heron Lake BioEnergy,
  LLC

  	
   

  
	
  Organization Name

  	
  PR/Award Number or
  Project Name

  
	
   

  	
   

  
	
  Robert Ferguson,
  President

  	
   

  
	
  Name(s) and
  Title(s) of Authorized Representative(s)

  	
   

  
	
   

  	
   

  
	
  /s/ Robert J. Ferguson

  	
   

  
	
  Signature(s)

  	
  Date

  



 

















 


	
  USDA

  	
   

  	
  Position 3

  	
   

  	
  FORM APPROVED

  
	
  Form RD 400-4

  	
   

  	
   

  	
   

  	
  OMB No. 0575-0018

  
	
  (Rev. 3-97)

  	
   

  	
   

  	
   

  	
   

  



 


ASSURANCE AGREEMENT


(Under
Title VI, Civil Rights Act of 1964)


 


	
  The Heron Lake
  BioEnergy, LLC

  
	
  (name of recipient)

  
	
   

  
	
  91246 390th Avenue,
  Heron Lake, MN 56137

  
	
  (address)

  



 


(“Recipient”
herein) hereby assures the U.S. Department of Agriculture that Recipient is in
compliance with and will continue to.  comply
with Title V1 of tile Civil Rights Act of 1964 (42 USC 2000d et. seq.), 7 CPR Part 15,
and Rural Housing Service, Rural Business-Cooperative Service, Rural Utilities
Service, or the Farm Service Agency, (hereafter known as the” Agency”)
regulations promulgated thereunder, 7 C.P.R. § 190 1.202.  In accordance with that Act and the
regulations referred to above, Recipient agrees that in connection with any
program or activity for which Recipient receives Federal financial assistance
(as such term is defined -in 7 C.P.R. § 14.2) no person in the United States
shall, on the ground of race, color, or national origin, be excluded from
participation in, be denied the benefits of, or be otherwise subjected to
discrimination.


 


1.                                       Recipient agrees that any transfer of any
aided facility, other than personal property, by sale, lease or other
conveyance of contract, shall be, and shall be made expressly, subject to the
obligations of this agreement and transferee’s assumption thereof.


 


2.                                       Recipient shall:


 


(a)                                  Keep such records and submit to the
Government such timely, complete, and accurate information as the Government
may determine to be necessary to ascertain our/my compliance with this
agreement and the regulations.


 


(b)                                 Permit access by authorized employees of
the Agency or the U.S.  Department of
Agriculture during normal business hours to such books, records, accounts and
other sources of information and its facilities as may be pertinent to
ascertaining such compliance.


 


(c)                                  Make available to users, participants,
beneficiaries and other interested persons such information regarding the
provisions of this agreement and the regulations, and in such manner as the
Agency or the U.S. Department of Agriculture finds necessary to inform such
persons of the protection assured them against discrimination.


 


3.                                       The obligations of this agreement shall
continue:


 

















 


(a)                                  As to any real property, including any
structure, acquired or improved with the aid of the Federal financial
assistance, so long as such real property is used for the purpose for which
tile Federal financial assistance is made or for another purpose which affords
similar-services or benefits, or for-as long as the Recipient retains ownership
or possession of the property, whichever is longer.


 


(b)                                 As to any personal property acquired or
improved with the aid of the Federal financial assistance, so long as Recipient
retains ownership or possession of the property.


 


(c)                                  As to any other aided facility or
activity, until the last advance of funds under the loan or grant has been made.


 


4.                                       Upon any breach or violation this
agreement the Government may, at its option:


 


(a)                                  Terminate or refuse to render or continue
financial assistance for the aid of the· property, facility, project, service or activity.


 


(b)                                 Enforce this agreement by suit for
specific performance or by any other available remedy under the laws of the
United States or the State in which the breach or violation occurs.


 


Rights
and remedies provided for under this agreement shall be cumulative.


 


	
  In witness whereof,

  	
  Heron Lake BioEnergy,
  LLC

  	
  on this

  	
   

  	
   

  
	
   

  	
  (name of recipient)

  	
   

  	
   

  	
   

  



 


date
has caused this agreement to be executed by its duly authorized officers and
its seal affixed hereto, or if a natural person, has hereunto executed this
agreement.


 


	
   

  	
   

  	
   

  	
  Heron Lake Bioenergy

  
	
   

  	
   

  	
   

  	
  Recipient

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Robert J. Ferguson

  
	
   

  	
   

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
  President

  
	
   

  	
  Title

  	
   

  	
  Title

  



 

















 


	
  Form RD 400-1

  	
  FORM APPROVED

  
	
  (Rev 5-00)

  	
  OMB No. 0575-0018

  



 


UNITED
STATES DEPARTMENT OF AGRICULTURE


 


EQUAL OPPORTUNITY
AGREEMENT


 


This agreement, dated                                                                                                       between
Heron Lake BioEnergy, LLC (herein called “Recipient” whether one or more) and
United States Department of Agriculture (USDA), pursuant to the rules and
regulations of the Secretary of Labor (herein called the ‘Secretary’) issued
under the authority of Executive Order 11246 as amended, witnesseth:


 


In
consideration of financial assistance (whether by a loan, grant, loan guaranty,
or other form of financial assistance) made or to be made by the USDA to
Recipient, Recipient hereby agrees, if the cash cost of construction work
performed by Recipient or a construction contract financed with such financial
assistance exceeds $10,000 — unless exempted by rules, regulations or orders of
the Secretary of Labor issued pursuant to section 204 of Executive Order 11246
of September 24, 1965.


 


1.                                       To incorporate or cause to be
incorporated into any contract for construction work, or modification thereof,
subject to the relevant rules, regulations, and orders of the Secretary or of
any prior authority that remain in effect, which is paid for in whole or in
part with the aid of such financial assistance, the following “Equal
Opportunity Clause”:


 


During the performance of
this contract, the contractor agrees as follows:


 


(a)                                  The contractor will not discriminate
against any employee or applicant for employment because of race, color,
religion, sex or national origin.  The
contractor will take affirmative action. 
To ensure that applicants are employed, and that employees are treated
during employment, without regard to their race, color, religion, sex, or
national origin.  Such action shall
include, but not be limited, to the following: employment, upgrading, demotion
or transfer, recruitment or recruitment advertising; layoff or termination;
rates of payor other forms of compensation; and selee1ion for training,
including apprenticeship.  The contractor
agrees to post in conspicuous places, available to employees and applicants for
employment notices to be provided by the USDA setting forth the provisions of
this nondiscrimination clause.


 


(b)                                 The contractor will, in all solicitations
or advertisements for employees placed by or on behalf of the contractor, state
that all qualified applicants will receive consideration for employment without
regard to race, color, religion, sex or national origin.


 


(c)                                  The contractor will send to each labor
union or representative of workers with which he has a collective bargaining
agreement or other contract or understanding, a notice, to be provided by the
USDA, advising the said labor union or workers’ representative of the
contractor’s commitments under this 


 

















 


agreement and shall post
copies of the notice in conspicuous places available to employees and applicants
for employment.


 


(d)                                 The contractor will comply with all
provisions of Executive Order 11246 of September 24, 1965, and of all
rules, regulations and relevant orders of the Secretary of Labor.


 


(e)                                  The contractor will furnish all
information and reports required by Executive Order 11246 of September 24,
1965, rules, regulations, and orders, or pursuant thereto, and will permit
access to his books, records, and accounts by the USDA Civil Rights Office, and
the Secretary of Labor for purposes of investigation to ascertain compliance
with such rules, regulations, and orders.


 


(f)                                    In the event of the contractor’s
noncompliance with the nondiscrimination clauses of this contract or with any
of the said rules, regulations, or orders, this contract may be cancelled,
terminated, or suspended in whole or in part and the contractor may be declared
ineligible for further Government contracts or federally assisted construction
contracts in accordance with procedures authorized in Executive Order No. 11246
of September 24, 1965, and such other sanctions may be imposed and
remedies invoked as provided in Executive Order No. 11246 of September 24,
1965, or by rule, regulation or order of the Secretary of Labor, or as otherwise
provided by Law.


 


(g)                                 The contractor will include the
provisions of paragraph 1 and paragraph (a) through (g) in every
subcontract or purchase order, unless exempted by the rules, regulations, or orders
of the Secretary of Labor issued pursuant to Section 204 of Executive
Order No. 11246 of September 24, 1965, so that such provisions will
be binding upon each subcontractor or vendor. 
The contractor will take such action with respect to any subcontract or
purchase order as the USDA may direct as a means of enforcing such provisions,
including sanctions for noncompliance: Provided, however, that in the
event the contractor becomes involved in, or is threatened with, litigation
with a subcontractor or vendor as a result of such direction by the USDA, the
contractor may request the United States to enter into such litigation to
protect the interest of the United States.


 


According
to the Paperwork Reduction Act of 1995, an agency may not conduct or sponsor,
and a person is not required to respond to, a collection of information unless
it displays a valid OMB control number.  The
valid OMB control number for this information collections is 0575-0018.  The time required to complete this
information collection is estimated to average 10 minutes per response,
including the time for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed, and completing and reviewing the
collection of information.


 


RD 400-1 (Rev. 5-00)


 


Position 6


 

















 


2.                                       To be bound by the above equal
opportunity clause with respect to its own employment practices when it
participates in federally assisted construction work: Provided, that if the
organization so participating is a State or local government, the above equal
opportunity clause is not applicable to any agency, instrumentality or
subdivision of such government which does not participate in work on or under
the contract.


 


3.                                       To notify all prospective contractors to
file the required ‘Compliance Statement,’ Form RD 400-6, with their bids.


 


4.                                       Form AD-425, Instructions to
Contractors, will accompany the notice of award of the contract.  Bid conditions for all nonexempt federal and
federally assisted construction contracts require inclusion of the appropriate “Hometown”
or “Imposed” plan affirmative action and equal employment opportunity
requirements.  All bidders must comply
with the bid conditions contained in the invitation to be considered
responsible bidders and hence eligible for the award.


 


5.                                       To assist and cooperate actively with
USDA and the Secretary in obtaining the compliance of contractors and
subcontractors with the equal opportunity clause and the rules, regulations,
and relevant orders of the Secretary, that it will furnish USDA and the
Secretary such information such as, but not litigated to, Form AD 560,
Certification of Non-segregated Facilities, to submit the Monthly Employment
Uti1ization Report, Form CC-257, as they may require for the supervision
of such compliance, and that it will otherwise assist USDA in the discharge of
USDA’s primary responsibility for securing compliance.


 


6.                                       To refrain from entering into any
contract or contract modification subject to Executive Order 11246 of September 24,
1965, with a contractor debarred from, or who has not demonstrated eligibility
for, Government contracts and federally assisted construction contracts
pursuant to the Executive Order and will carry out such sanctions and penalties
for violation of the equal opportunity clause as may be imposed upon
contractors and subcontractors by USDA or the Secretary of Labor pursuant to Part IT,
Subpart D, of the Executive Order.


 


7.                                       That if the recipient fails or refuses to
comply with these undertakings, the USDA may take any or all of the following
actions:  Cancel, terminate, or suspend
in whole or in part this grant (contract, loan, insurance, guarantee); refrain
from extending any further assistance to the organization under the program
with respect to which the failure or refund occurred until satisfactory
assurance of future compliance has been received from such organization; and
refer the case to the Department of Justice for appropriate legal proceedings.


 


Signed
by the Recipient on the date first written above.


 


	
   

  	
   

  	
  /s/ Robert J. Ferguson

  
	
  Recipient

  	
   

  	
  Recipient

  



 

















 


	
   

  	
  Heron Lake BioEnergy,
  LLC

  
	
  (CORPORATE SEAL)

  	
  Name of Corporate
  Recipient

  
	
   

  	
   

  
	
  Attest:

  	
  By Robert J. Ferguson

  
	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
  Secretary

  	
   

  	
   

  



 





















 


HERON LAKE BIOENERGY, LLC


 


Exhibit B
to Letter of Agreement:


MANAGEMENT
REPRESENTION LETTER


 


1.                                       Loan funds were not used to assist
projects of which any director, officer, general manager, or significant
stockholder of FEDERATED RURAL ELECTRIC, or close relative thereof, is an
owner, or which would create a conflict of interest or the appearance of a
conflict of interest.


 


2.                                       Loan funds were not expended for site
development, the destruction or alteration of buildings, or other activities
that would adversely affect the environment or limit the choice of reasonable
alternatives prior to satisfying the requirements of 7 CFR Section 1703.32,
Environmental Requirements.


 


3.                                       Loan funds were not expended to purchase
or lease any real property, materials, equipment, or services from FEDERATED
RURAL ELECTRIC, its subsidiary, an affiliate of FEDERATED RURAL ELECTRIC, or
significant stockholders, officers, managers or directors of FEDERATED RURAL
ELECTRIC, or close relatives thereof, where the purchase or lease has not been
fully disclosed to the Small Business-Cooperative Service (RBS) and received
RBS’s prior written approval.


 


4.                                       Loan funds were not expended to payoff
existing indebtedness incurred prior to receipt of the FEDERATED RURAL ELECTRIC’s
completed application by the RBS or for refinancing or repaying a loan made
under the Rural Electrification Act of 1936, as amended, or a program
administered by the Rural Utilities Service.


 


5.                                       Loan funds were not expended for any
electric or telephone purpose, as determined by the RBS.


 


6.                                       Loan funds were not expended for any
community antenna television systems or facilities.


 


7.                                       Loan funds were not expended for projects
located in areas covered by the Coastal Barrier Resources Act (16 U.S.C. 3501 et seq.).


 


8.                                       The Project did not result primarily in
the transfer of any existing employment or business activity from one area to
another.


 


9.                                       Loan funds were not expended for anything
other than an approved purpose.


 


 


	
  /s/ Robert J. Ferguson

  	
   

  	
  11/14/07

  
	
  Name and Signature of
  Authorized

  	
  Date

  
	
  Loan Recipient Official